ACC 231
Practice Problems
Name
Mr. McDermott
1.
Viking Sports is a manufacturer of sportswear. It produces all of its products in one department.
The information for the current month is as follows:
Beginning work in process
Units started
Units completed
Ending work in process
Spoilage
Beginning work-in-process direct materials
Beginning work-in-process conversion
Direct materials added during month
Direct manufacturing labor during month
20,000 units
40,000 units
50,000 units
8,000 units
2,000 units
$12,000
$ 4,000
$60,000
$20,000
Beginning work in process was half complete as to conversion. Direct materials are added at the
beginning of the process. Factory overhead is applied at a rate equal to 50% of direct
manufacturing labor. Ending work in process was 60% complete. All spoilage is normal and is
detected at end of the process.
Required:
Prepare a production cost worksheet if spoilage is recognized and the weighted-average method is used.
(Show all work)
2. For supply item ABC, Andrews Company has been ordering 125 units based on the recommendation
of the salesperson who calls on the company monthly. A new purchasing agent has been hired by the
company who wants to start using the economic-order-quantity method and its supporting decision
elements. She has gathered the following information:
Annual demand in units
Days used per year
Lead time, in days
Ordering costs
Annual unit carrying costs
250
250
10
$100
$20
Required:
Determine the EOQ, average inventory, orders per year, average daily demand, reorder point,
annual ordering costs, and annual carrying costs. (Show all work)
3. The Jarvis Corporation produces bucket loader assemblies for the tractor industry. The
product has a long term life expectancy. Jarvis has a traditional manufacturing and inventory
system. Jarvis is considering the installation of a just-in-time inventory system to improve its cost
structure. In doing a full study using its manufacturing engineering team as well as consulting
with industry JIT experts and the main vendors and suppliers of the components Jarvis uses to
manufacture the bucket loader assemblies, the following incremental cost-benefit relevant
information is available for analysis:
The Jarvis cost of investment capital hurdle rate is 15%.
One time cost to rearrange the shop floor to create the manufacturing cell workstations is
$275,000.
One time cost to retrain the existing workforce for the JIT required skills is $60,000.
Anticipated defect reduction is 40%. Currently there is a cost of quality defect assessment listed
as $150,000 per year.
The setup time for each of the existing functions will be reduced by 67%. Currently the forecast
for setup costs are $225,000 per year.
Jarvis will expect to save $200,000 per year in carrying costs as a result of having a lower
inventory.
The suppliers will require a 15% premium over the current level of prices in order to position
themselves to supply the material on a smaller and more frequent schedule. Currently the
materials purchases are $1,500,000 per year.
Required:
Determine whether it is in the best interest of Jarvis Corporation to install a JIT system. (Show all
work)
4. Vision Enterprises manufactures converter boxes for high definition TVs. All processing is initiated
when an order is received. For March there were no beginning inventories. Conversion Costs and Direct
Materials are the only manufacturing cost accounts. Direct Materials are purchased under a just-in-time
system. Backflush costing is used with a finished goods trigger point. Additional information is as
follows:
Actual conversion costs
Standard materials costs per unit
Standard conversion cost per unit
Units produced
Units sold
$435,000
115
85
7,900
7,600
Required:
Record all journal entries for the monthly activities related to the above
transactions if backflush costing is used. (Show all work)